2020 (9) TMI 305 - AT - Insolvency and Bankruptcy

Liquidation of Corporate Debtor - no resolution plan was received during the Corporate Insolvency Resolution Process period and the promoter group had failed to provide concrete information about the prospective investor qua its plan for resolution/settlement - HELD THAT - Admittedly, the proposed settlement would involve sale of assets of the Corporate Debtor which depended upon a variety of factors including sound financial position of the proposed Investor and its ability to raise the funds, more so, when operations of the Corporate Debtor were lying defunct. Besides, the settlement proposal cannot be thrust upon the Committee of Creditors as decision in regard to its viability and feasibility exclusively lies within the domain of commercial wisdom of Committee of Creditors. That apart, in absence of a resolution plan, the Committee of Creditors would have no option but to recommend liquidation of the Corporate Debtor. The law as enshrined in Section 33(2) only enjoins upon the Resolution Professional to intimate the Adjudicating Authority that the Committee of Creditors has, by requisite majority, decided to liquidate the Corporate Debtor, provided the Resolution Plan earlier approved by the Committee of Creditors has not been confirmed by the Adjudicating Authority. Thus, it is manifestly clear that even after recommending a Resolution Plan for approval of the Adjudicating Authority, the Committee of Creditors can retract it and withdraw the decision in regard to approval of such Resolution Plan by the Committee of Creditors - The Adjudicating Authority has rightly observed that even after pushing the Corporate Debtor into liquidation, Promoter/Ex-Director of the Corporate Debtor can take recourse to Section 230 of the Companies Act, 2013 by submitting a scheme for revival of the Corporate Debtor, subject of course to eligibility of the applicant. Appeal dismissed.

Summary

Issues involved:
Corporate Insolvency Resolution Process, Liquidation, Resolution Plan, Committee of Creditors, Liquidation Order, Settlement Proposal, Viability and Feasibility, Commercial Wisdom, Primacy of Committee of Creditors, Recall of Recommendation, Intimation to Adjudicating Authority, Companies Act, Scheme for Revival.

Analysis:

The judgment pertains to two appeals arising from the Corporate Insolvency Resolution Process initiated by a Financial Creditor against a Corporate Debtor. The first issue addressed is the liquidation of the Corporate Debtor due to the absence of a resolution plan during the insolvency resolution period. The Resolution Professional sought liquidation as no viable resolution plan was received, and the promoter group failed to provide concrete information about a prospective investor for resolution or settlement. The Adjudicating Authority, noting the lack of a settlement proposal and negative industry outlook, passed a liquidation order, which was challenged in the appeal (AT) (Insolvency) No. 751 of 2020.

The second issue involves an appeal by the erstwhile Promoter/Director of the Corporate Debtor, seeking to keep the liquidation application in abeyance. The Promoter claimed a willingness and ability to settle the claims of creditors, citing a low debt-asset ratio. However, the Adjudicating Authority found the proposal lacking concrete details and dismissed the request, leading to the liquidation order. The judgment emphasizes the importance of a resolution plan and the commercial wisdom of the Committee of Creditors in deciding on liquidation.

The judgment highlights the role of the Committee of Creditors in the insolvency process. It discusses the provisions of the Insolvency and Bankruptcy Code, particularly the authority of the Committee to decide on liquidation at any time before the confirmation of a resolution plan. The judgment clarifies that the Committee can withdraw its recommendation for a resolution plan, underscoring its primacy in the insolvency proceedings.

Furthermore, the judgment acknowledges the possibility for the Promoter/Ex-Director to submit a scheme for the revival of the Corporate Debtor under Section 230 of the Companies Act, 2013, even after liquidation. The judgment concludes by dismissing the appeals, noting the lack of merit and emphasizing the adherence to legal provisions in insolvency proceedings.